The current price of LC Corporation stock is $40. In each of the next two years, this stock price can either go up by $15.00 or go down by $15.00. LC stock pays no dividends. The one-year risk-free interest rate is 15% and will remain constant.

1. Using the binomial pricing model, calculate the price of a two-year American put option on LC stock with a strike price of $40.

A. 2.55

B. 5.13

C. 3.91

D. 4.52

2. Using the binomial pricing model, calculate the price of a two-year American straddle option on LC stock with a strike price of $40.

Group of answer choices

A. 14.86

B. 0

C. 16.22

D. 10.25